How to combat mortgage stress
By Gillian Bullock, ninemsn Money
While the cash interest rate may be on the way down this year, commercial banks may not mirror the Reserve Bank's moves, so how can you make your current home loan more manageable?
Warren O'Rourke, national manager corporate affairs at Mortgage Choice, believes there are a number of ways to reduce the pressure.
For instance, one suggestion is to assess your current loan and consider refinancing. Say you have a loan that offers features such as redraw and offset that you don't even use. You may be better off switching to a basic product which has a lower interest rate. According to Mortgage Choice, a $250,000 loan over 30 years at the standard variable rate of 9.40 percent requires a monthly repayment of $2083.92. The basic variable rate is only 8.81 percent which is $1977.47 a month, saving you $106.45.
Given that every 0.25 percent rise in interest rates equals an extra repayment of $16.92 for every $100,000 borrowed, this extra $106.45 would give you the capacity for a further two interest rate hikes.
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